Correlation Between CSL and Advanced Braking
Can any of the company-specific risk be diversified away by investing in both CSL and Advanced Braking at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CSL and Advanced Braking into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL and Advanced Braking Technology, you can compare the effects of market volatilities on CSL and Advanced Braking and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CSL with a short position of Advanced Braking. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Advanced Braking.
Diversification Opportunities for CSL and Advanced Braking
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between CSL and Advanced is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Advanced Braking Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Braking Tec and CSL is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CSL are associated (or correlated) with Advanced Braking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Braking Tec has no effect on the direction of CSL i.e., CSL and Advanced Braking go up and down completely randomly.
Pair Corralation between CSL and Advanced Braking
Assuming the 90 days trading horizon CSL is expected to generate 32.67 times less return on investment than Advanced Braking. But when comparing it to its historical volatility, CSL is 2.79 times less risky than Advanced Braking. It trades about 0.01 of its potential returns per unit of risk. Advanced Braking Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Advanced Braking Technology on September 14, 2024 and sell it today you would earn a total of 4.60 from holding Advanced Braking Technology or generate 115.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL vs. Advanced Braking Technology
Performance |
| Timeline |
| CSL |
| Advanced Braking Tec |
CSL and Advanced Braking Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and Advanced Braking
The main advantage of trading using opposite CSL and Advanced Braking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL position performs unexpectedly, Advanced Braking can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Advanced Braking will offset losses from the drop in Advanced Braking's long position.| CSL vs. Australian Unity Office | CSL vs. Farm Pride Foods | CSL vs. Beston Global Food | CSL vs. Cleanaway Waste Management |
| Advanced Braking vs. FSA Group | Advanced Braking vs. CSL | Advanced Braking vs. Tamawood | Advanced Braking vs. Cochlear |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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